It can’t be a fun week to be a marketer at Netflix. A year ago Netflix seemed unassailable.
Now its fate may be in the hands of the very Hollywood studios it bested and a ‘pot-smoking guy’ who owns its new brand on Twitter.
Just a year ago, an Econsultancy post
concluded that movie studios missed their streaming video opportunity,
and that Netflix, with a surging stock price had all but eaten their
That was a fair assessment, then. After all, Netflix still accounts for a staggering 20% of US internet
traffic during prime television viewing hours. That gives it a future as bright as any entertainment network.
Meanwhile, competitors like Hulu are falling apart, Apple TV is still
managed like a corporate hobby, and GoogleTV is stymied by the networks.
But Netflix is no longer above the fray. You see,
the future hasn’t been arriving fast enough for the Netflix business
DVDs through the mail is costly and it drives lots of operational
overheads, which otherwise could be spent on licensing desperately needed
Though Netflix has a huge subscriber base, new “web only”
competitors will be able to grow faster than them. That’s the source of
the huge multichannel mistake of the Netflix ill-fated price increase. Then
came a subscriber insurrection, reduced growth estimates for Wall
Street, and a tumble in the firm’s stock price of 27% in just the last
So that’s the background for what seems like a frantic move this week, Netflix is splitting off its DVD and video game
by mail business in to Qwikster.
The US first sale doctrine
Yes, this fragments the Netflix brand and
customer experience, and that’s bad. However, potentially worse, it loses what has been an ace in the hole for
Netflix: the first-sale doctrine.
All anyone needs to do to rent a
physical DVD to others is to legally purchase it first. This meant
Hollywood couldn’t freeze Netflix out of renting DVDs; on-demand
streaming requires licensing.
How the mighty have fallen
With an unbundled offering, Netflix seems far more assailable. But
before Netflix can take on Hollywood studios, Walmart, Redbox and others
who want to take a piece of their business, they need to take on a guy
with a dormant Twitter account.
Until yesterday the Qwikster Twitter account was identified by an icon of a pot smoking Elmo from the children’s television show Seasame Street.
When Jason Castillo got 9,000 new Twitter followers in a single day, and found his in-box
clogged with offers to buy his account, he realized that his dormant
Twitter account, Qwikster, really had some real value.
In fact, in the day since Netflix renamed its mail-by DVD using that
name, his life has taken on sort of a reality tv show vibe.
letting it show with a stream of partially conscious nonesense, mixed
with musings about selling the account, that must be driving brand
managers at Netflix crazy.